Crypto Interest Accounts 101: Features, Benefits & Risks Explained
The Crypto interest account lets you gain interest on your lent cryptocurrency and reverts your money with interest. In short, it is an account that lets you donate cryptocurrency and gain interest in that lent cryptocurrency.
However, like many such investments, the crypto interest account is also volatile, and you may lose money while vice versa may also happen.
Basics of Crypto Interest Account
Some cryptocurrency platforms, such as Gemini, Coinbase, and Binance, offer a way to gain interest in crypto. These provide interest on your bought digital assets.
The process of a crypto interest account is the same as a bank saving account. It provides interest on your money in the bank, whereas you get interest on loaning your digital assets.
However, one thing to jot down is the crypto interest account has high-risk issues and is more volatile.
Three Interesting Facts To Know About A Crypto Interest Account
1. Interest Rate
The most imperative factor to notice about the crypto interest account is that this account provides a very high-interest rate, as compared to a bank’s saving account.
While the interest rate of the high-yield savings account is closer to 0.50 % of your average annual yield, while the interest rates of the crypto interest account can go as high as 14% in some platforms, the average interest rate lies anywhere between 6% – 9 %.
While it is 0.33% for the national average interest rate of any high-yielding savings account.
2. Revenue Generated
While in a savings account, if the interest rate does not vary in a year, the revenue you will generate is comparatively easier to estimate, while it fluctuates with the crypto interest account.
There are two types of digital assets you should know to understand the volatility level that varies with different assets. You should know this while surfing through various crypto firms’ rates.
- Stablecoins: An example of stablecoin is the USD ($). These cryptocurrency values are fixed by the US dollar or any other asset.
- Cryptocurrencies: Cryptocurrencies such as Bitcoin, Litecoin, and any such cryptocurrency is highly volatile on a day-to-day basis.
3. Varying Limits Associated With Withdrawal Fees
Different cryptocurrencies are associated with different fees that you must know. There are also varying maximum or minimum withdrawal amounts.
There are 2 types of access that different crypto firms provide:
- Fixed Terms: When you are provided fixed terms access, you are agreeing to lock your digital assets with that firm for a certain period, to yield high interest.
- Flexible Terms: When accepting flexible terms, you can withdraw your assets or revenue at any particular time.
Risk Factors Associated with Crypto Interest Account
Everything that glitters is not gold. Indeed, crypto investments offer high returns, but with them comes an increased risk of losing money. Thus, it is advised to invest in crypto-currency only after considering all the associated risk factors. See them below and understand if crypto is for you.
1. Crypto Faces High Volatility
It is not hidden from the public view that Cryptocurrencies face high volatility than any other investment.
The daily value of any cryptocurrency can surge high or plummet down the drain, and no one can guess what will happen.
Intensive research is needed while pursuing this investment option, and also some of the technical processes like:
- How to transfer cryptocurrency from one blockchain to another.
- How to transfer cryptocurrency outside a platform.
You must also consider the time, risk, and mental struggles you might face if your investment plummets.
2. Your Deposit Might Go Down The Drain
If your crypto firm goes bankrupt, you will lose all your money as a crypto interest account is not insured by the Federal Deposit Insurance Corporation.
The government doesn’t provide you with any guarantee that your deposits with interest are reverted to you.
3. Defaulter Risk
One of the risks the crypto interest account face is that the borrower may or may not pay you. It is always a risk to consider because it can happen to anyone at any time.
4. Digital Asset Risks
According to a survey, more than 13000 digital currencies flowing across the market. However, most of them do not provide high returns as they might not have their value rise.
Some of these digital currencies also face extinction. This is due to high volatility.
Conclusion
However, if you are a beginner in investing, you must consider the risk factors associated with this account as it is highly volatile, and you might lose a whole bunch of money. It is highly advisable to consider all these factors while opening a crypto interest account.
